There are elements of certainty and trust that come with keeping your money locked away in a financial institution, even in the midst of a recession brought on by a global pandemic. And when the Federal Deposit Insurance Corporation, more commonly known as the FDIC, insures that money — backing it “by the full faith and credit of the United States government,” according to the FDIC’s website — they assume some responsibility.
So in the early months of 2020 — when the novel coronavirus officially became a global pandemic and tens of millions of Americans scrambled to make ends meet as a result of layoffs, furloughs, and pay reductions — banks similarly scrambled. Financial institutions were forced to adapt to the onslaught of frenzied consumers who couldn’t afford to keep the lights on and whose unemployment checks were nowhere to be found.
However, when it comes to bank fees, the numbers have come back not in favor of the consumer. Cushion — an artificial intelligence–enabled web app that automatically negotiates bank and credit card fees on behalf of its users — analyzed the more than $13 billion worth of transactions in its system and found that, although there was a dip in average fees per person per month with the onset of COVID-19, the average amount of fees has continued to rise in recent months. Average combined bank fees and interest charges per person per month decreased from $106.70 in March to $90.60 in April, but has since risen to $130.60 in August — the highest average that Cushion has seen since launching in 2018. For overdraft fees alone, the average fees more than doubled, from $34 per person per month in April to $71 in August.
In May, the FDIC released a list of “frequently asked questions” to address any bank-related concerns consumers might have during the pandemic, some being:
In most cases, the FDIC said they were encouraging banks to accommodate customers’ unique needs during this difficult time. But also in most cases, it required customers to contact their banks in order to take advantage of these relief options — ah, the fine print. As a result, many felt left in the lurch.
Cushion sent out a COVID-19 financial impact survey to a small sample of its user base, garnering more than 4,000 responses. In the survey, less than 20% of respondents reported feeling like their bank has been supportive during the pandemic, more than 80% saying their bank has not reached out (by phone, email, or otherwise) to inform them of their relief options. Still, many want answers. Approximately 33% of survey respondents have contacted their financial institution since the start of the pandemic, nearly two thirds of whom have left the conversation feeling dissatisfied with the results, citing insensitivity from representatives, outrageous wait times, and outright refusal to waive fees, among other things.
Financial institutions profit upward of $200 billion in fees and interest charges each year. In 2019, U.S. banks collected more than $11 billion in overdraft-related fees alone, according to the Center for Responsible Lending. Even so, banks prefer to keep their customers happy, even if that means waiving fees. There are a finite number of consumers and more than 15,000 financial institutions fighting for their business. Once a bank wins over a consumer, their business becomes invaluable; a bank would much rather meet their customers’ unique needs than risk losing them and spending more money to acquire a new one.
Profits aside, financial institutions are struggling to meet the requests of account holders at the moment.
For many, this insight didn’t come soon enough. Instead they were left to suffer the consequences of untimely layoffs, grocery store food shortages, unforeseen account closures, and paycheck mishaps. Unfortunately for them, their bank accounts were the ones to pay.
Overdraft fees are among the most common penalties charged by banks. According to a 2017 report by the Consumer Financial Protection Bureau, 30% of consumers overdraw their checking account each year. However, a small subset pays the most fees. “The 8% of consumers who overdraft more than 10 times per year pay 74% of overdraft fees,” the CFPB reports.
Before the pandemic, Jenifer Royer rarely incurred overdraft fees. “But when COVID hit,” Royer says, “and we didn’t have the necessities that we needed, we were in that panic mode.” Living in Bakersfield, California, Royer now juggles pandemic-related health protocol on top of state-enforced CDC mandates as a single foster parent of three. She knowingly overdrafted her account by hundreds of dollars, but she felt she had no choice.
When all was said and done, Royer says she spent nearly $1,000 to stock her home with food for the family and pets, household products, pull-ups, activities, gas for her car, and other necessities.
James W. of Scottsdale, Arizona, found himself in a similar situation. Prior to the pandemic, he and his ex-wife shared custody of their three children. Come April, he took the kids on full-time.
Unfortunately, he says, he doesn’t qualify for many of the financial assistance options since he is a homeowner without a mortgage and hasn’t been able to refinance his car due to a low credit score as a result of his divorce. So, he says, the high-interest loans caused everything to snowball. Within a week, he took on more than a dozen overdraft fees at $35 a piece.
On March 19, federal regulators released a joint statement encouraging banks to work with their customers by waiving fees, easing restrictions on cashing checks, and increasing credit limits, among other reliefs. Around the same time, Senators Cory Booker (D-NJ) and Sherrod Brown (D-OH) introduced legislation that would temporarily ban banks from charging overdraft and non-sufficient funds fees during the crisis; and about a month later, the two senators sent letters to top bank CEOs further urging them to issue the ban. Yet, according to Cushion’s survey and user interviews, 65% of the people who had contacted their bank for assistance did not feel like their bank was willing to help based on their unique situation.
Michael Willetts, a San Diego resident working as an independent contractor for a painting company, reached out to his bank for a $5,000 loan. As a contractor, Willetts always has several jobs lined up, but paydays are inconsistent, the amounts vary, and payment can come from different clients — meaning he cannot set up direct deposit. Because of this, his bank said it could not provide the loan.
In August, 13.6 million Americans were unemployed, according to the Bureau of Labor Statistics. Unemployment checks and the $1,200 stimulus checks passed under the CARES Act have proven to be a lifeline for many. According to audio obtained by the American Prospect magazine, Ronda Kent — the Chief Disbursing Officer and Assistant Commissioner for Payment Management with the Treasury’s Bureau of the Fiscal Service — says that banks and debt collectors had the option to take stimulus check funds to cover outstanding payments and loans. While some banks opted not to and instead deposited the full $1,200 into customers’ accounts — despite existing penalties — this decision posed a different set of issues.
In Big Sky, Montana, one of Cushion’s users, who asked to remain anonymous, had overdraft fees at the start of the pandemic. In order to deposit her full stimulus check, her bank refunded the amount she had overdrawn, allowing her to use the full $1,200. What she didn’t know was that this gesture was temporary. One month later, the bank unexpectedly rescinded the temporary refund and she acquired several more overdraft fees.
Among Cushion’s users, at least 1,300 people experienced a similar situation. Another user incurred only one overdraft fee between the time that their bank temporarily refunded the fees and then pulled the refund back out. After the refund was rescinded, the user incurred 13 overdraft fees within the next seven days.
Stimulus checks, however, are not the only lifelines stirring up trouble.
A few states over in Georgetown, Kentucky, Chanda Owens has worked at the local family-owned jewelry store for six years. When COVID-19 hit and the shop was declared a non-essential business, Owens relied on a mix of unemployment insurance and overdraft protection until the grand reopening in August. Because millions were filing for benefits at the same time, Owens’ check was delayed, so she didn’t get paid for a month and incurred overdraft fees for the electric payment, water bill, and groceries, among other essentials. Then there was a second break in payment before she started up work again, so she found herself in another tough situation. It didn’t help that her 8-year-old chihuahua, Penny, racked up a bill of $900 after being rushed to the emergency vet for kidney disease.
Owens does most of her banking at the fully automated branch that her bank opened in her town. It’s nearest to her house, and she has anxiety, which is not ideal when negotiating with a customer service representative for fee refunds. Because of her anxiety — and assuming that her bank wouldn’t refund the fees anyway — she has held off on calling them. Although she’s been grateful for overdraft protection, she’s not thrilled with the financial stress it’s caused.
For the people who have spoken with representatives at their banks, the interactions have often been inconsistent and less than helpful.
James W. from Scottsdale — who incurred more than a dozen overdraft fees and resorted to high-interest loans — is sick of being hundreds of dollars in the hole due to fees, especially since he knows it’s only a matter of time before another auto payment charges his account. His solution: bringing his account positive with the goal of closing it down entirely so he wouldn’t have to worry about the scheduled payments. His bank strongly advised against it, warning that closing an account would “look bad to the outside world” unless fraud had been committed. As of early September 2020, James was in a back-and-forth with his bank, trying to determine the best path forward.
James says, although the bank representative was good as far as customer service goes, he wishes the overall bank policy were a little more forgiving. Alaric Von Royeaux, a business administration student in Colorado Springs, Colorado, can’t say the same about his experience.
After losing his job and becoming a victim of theft and fraud, Von Royeaux says he has felt no compassion from his bank for the duration of the pandemic. He says he felt like he was running in circles, getting redirected from one branch to another, customer service line to fraud department.
Banking can be a tricky business. Financial institutions are businesses, and fees account for a significant portion of their bottom line. But that’s not to say they don’t — and can’t — help their customers in whatever way they can. The fact of the matter is that they’re colossal machines, and new processes require time to take effect. So if you’re looking for relief in these trying times, you might have to go out and fight for it yourself. This might be a lot to ask, considering the immense financial, mental, and physical stress that many are currently under. And the results might not always be what you are hoping for. However, if you are able to make time to vouch for yourself and your finances, it might just pay off.
Here are some tips that could increase your chance of success when talking to your bank, and ultimately help you take back control of your finances:
Cushion negotiates bank and credit card fees so you waste less money, save more, and live a financially healthier life. It’s your money after all, and we’re here to help safeguard it. Since Cushion’s launch in 2018, our customers have received more than $4 million in refunds. We leverage artificial intelligence, advanced fee-detection technology, and bank-level encryption to put money back into your account—quickly, efficiently, and securely. More than that, we equip you with the tools for success by providing the most up-to-date data and insights in banking, news, and financial wellness.